The Indian Prime Minister’s address on Independence Day is the major event of the political year, equal to the US President’s ‘State of the Union’ speech. It was particularly important this year as India has a new reforming prime minister in Narendra Modi.
It it is thus hugely significant that top of his agenda was opening up the country to foreign business, and the need for toilets, as the Financial Times reports:
“I want to tell the world, ‘come, make in India’,” he said from the walls of the 17th-century Red Fort in Delhi in his first Independence Day speech. “We have the skills, we have the strength, we have the people.”
Modi then focused on toilets, and confirmed that the government was targeting sanitation for all in 10 years:
“I don’t know if people will appreciate my talking about dirt and toilets from the Red Fort. But I come from a poor family. I have seen poverty, and the attempt to give dignity to the poor starts from there”
The need is truly desperate, as the chart above shows from the World Health Organisation. They suggest that 597 million people still defecate outside in India. This vast number equals 10% of the world’s total population. It is also 10 times more than 2nd-placed Indonesia, where 54m have no access to toilets.
The blog knows that most companies are currently not set up to focus on critical issues like this. But that is no reason to ignore the potential. There are not many $10bn markets where competition is currently non-existent, and where the technology and know-how required are available immediately.
Equally important is that the alternative of hoping for traditional growth markets to recover looks very much like wishful thinking:
- The market for luxury goods in China is looking very weak with the anti-graft campaign in full gear. And China was half of the global luxury market in 2013
- The Eurozone economy is already weakening again, whilst the German Bundesbank is warning it will be hit by the increase in global tension in the Ukraine and elsewhere
- US auto and housing markets face major question marks with the West having reached ‘peak car’ levels and US housing markets already slowing down
Of course, moving into this new market represents a challenge. But it is also likely to be a stepping-stone to further, currently untapped markets focused on basic needs, as we described in Chapter 7 of ‘Boom, Gloom and the New Normal’.
As such, it will provide valuable learning experience for the future. And it will also be a lot more satisfying than banging your head against a brick-wall, now the profitable markets of the SuperCycle have now gone ex-growth.
There is never a shortage of growth opportunities. But too often companies choose not to access them. Hopefully that won’t happen with the opportunity to supply millions of tonnes of polymer to meet India’s desperate need for toilets.
As the blog wrote recently, 600 million Indians currently defecate in fields – as shown above in the photo – because their homes have no toilets. They represent nearly 10% of the world’s population. And as the New York Times notes:
“Human waste surrounds parks and lines roads and train tracks. Women in rural areas wait until dark to relieve themselves outside, leaving them vulnerable to rape. In the darkness, some say they sometimes set down young children in others’ waste or step in it themselves….And rapid population growth has meant that most Indians are being exposed to more human waste than ever before.”
So the blog would like to challenge chemical and polymer companies to do something about this, and make money.
There would be enormous social, economic and developmental benefits from solving this problem. The provision of toilets is the basic need for a society – even more basic than drinking water. The reason is that you can’t have pure drinking water without a sewage system. The water, as in India today, simply becomes contaminated with disease.
The problem is also urgent. New research has highlighted how even well-fed children can be literally stunted for life due to open-field defecation:
“Children are exposed to a bacterial brew that often sickens them, leaving them unable to attain a healthy body weight no matter how much food they eat. “These children’s bodies divert energy and nutrients away from growth and brain development to prioritize infection-fighting survival,” said Jean Humphrey, a professor of human nutrition at Johns Hopkins Bloomberg School of Public Health. “When this happens during the first two years of life, children become stunted. What’s particularly disturbing is that the lost height and intelligence are permanent.”
Thus health officials suggest that “India’s stunting problem represents the largest loss of human potential in any country in history, and it affects 20 times more people in India alone than H.I.V./AIDS does around the world.”
The numbers impacted are indeed huge. The Economist suggests up to half of all Indian children are affected.
The good news is that we know the answer to the problem:
- Today’s increased life expectancy in developed nations is based on the major advances in sanitation that took place a century ago
- They were the building block upon which later advances such as vaccines and antibiotics were able to build
It should also be a profitable opportunity. Some top-of-the-head calculations suggest that:
- India needs at least 100m toilets to be built – each requiring at least $50 of polymer
- All of these toilets need connecting to sewage works – probably needing another $5bn of PVC or PE piping
So that is a minimum $10bn opportunity on its own, even before we add in all the other parts of the system, plus maintenance and upkeep. It also carries little technical risk, as the technology is well known. And it could easily become a stepping stone to other major opportunities.
- For example, once the toilets are installed, it would be comparatively easy to create a village biogas system that would provide electricity for the village
- In addition, sanitation is clearly key to leveraging India’s economic potential. 48% of Indians currently defecate outside, compared to only 1% of Chinese, according to latest WHO/UNICEF data.
Of course, there are plenty of reasons that companies can dream up to explain why this opportunity is not for them. They will be the losers as we move into the New Normal, as their focus is always to find reasons NOT to do something.
Blog readers, however, are people who like to discover new opportunities, especially when they are both profitable and clearly ‘the right thing to do’. Installing toilets is also the declared policy priority of the new Modi government:
“By 2022, no Indian should be without a home, without clean water, without electricity and without a toilet”.
Equally important, as we highlight in chapter 8 of Boom, Gloom and the New Normal, is that there should be plenty of funding available to kick-start this development.
Please think about whether your company might want to become involved. And contact me at email@example.com if you would like to discuss further.
As the blog discussed last week, it seems that a new type of leader is starting to emerge in some of the world’s major countries. Premier Narendra Modi in India, like President Xi Jinping in China, seems to be focused on achieving change – and not just on staying in power for its own sake.
His vision is simple and very powerful:
“By 2022, no Indian should be without a home, without clean water, without electricity and without a toilet”.
This could be very good news for India, which is set to have the world’s largest population within 20 years, due to having higher fertility rates than China. As the chart above shows, however, it only has a limited time period in which to benefit from this Demographic Dividend:
- Its fertility rate has already fallen 60% since 1950, from around 6 babies/woman to just 2 babies/woman today (green shading)
- This is below the replacement level of 2.1 babies/woman, and means India’s population will start to decline if this trend continues
- Life expectancy has increased 80% over the same period, from 36 years in 1950 to 65 years today
- This means that India will follow China into becoming an ageing society in due course
India is, of course, also one of the world’s poorest countries. Its GDP/capita of just $1500 puts it in 140th place in the world. By comparison, China is 83rd with GDP/capita of $6700. So Modi’s focus has to be relevant to its economic wealth, if it is to achieve anything meaningful.
The blog’s colleague, John Richardson, has written an excellent summary of the challenges and opportunities facing Modi in India. He rightly argues that “a war on poverty – especially extreme poverty” must be the key target.
“This would mean many more children would be healthy-enough to attend school on a regular basis. In parallel major improvements in the education system must also take place.
“Key to alleviating poverty will be improving access to safe drinking water, sanitation and safe and plentiful supplies of food. This is where the chemicals industry can play a critical role in making this happen. If more and more children are able to attend good schools, they will grow up to be a little richer than their parents. This would translate into much greater domestically-derived growth, which will happen regardless of India’s success or failure in export markets.”
He is clearly right. Simple metrics are what is needed to focus activity in the right direction. The fact that half of India’s population currently have no access to a toilet, and instead have to defecate in fields, is one such target that anyone can appreciate.
The numbers speak for themselves:
- 600 million Indians currently have to defecate in the fields, or wherever they can find an available place.
- They total 60% of the world total of residents who have to live without toilets
- The previous government spent just 0.1% of GDP on water and sanitation provision, less even than Bangladesh
This is why Indian villages are thought to be among the unhealthiest communities in the world. The rewards would be immense, as Bloomberg notes:
“At stake is $54bn a year in economic costs in India, equivalent to about 3% of GDP in Asia’s third-biggest economy and a quarter of global losses from poor sanitation. Open defecation contaminates ground water, spreads disease and exposes women to sexual assaults, including two girls in India who were raped and hanged from a tree last month after squatting in a field near their homes.”
Change is, of course, difficult to achieve. As the great Italian writer Nicolo Machiavelli wrote in his most famous work,’ The Prince’
“There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things. Because the innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may do well under the new.
“This coolness arises partly from fear of the opponents, who have the laws on their side, and partly from the incredulity of men, who do not readily believe in new things until they have had a long experience of them. Thus it happens that whenever those who are hostile have the opportunity to attack they do it like partisans, whilst the others defend lukewarmly.”
We will know whether Modi is serious about reform, once today’s honeymoon period ends, if we start to find that he is being seriously attacked by people who have done well under the old conditions.
The fact that something is difficult, does not mean it should not be attempted. Companies who focus on the opportunities in India, from the provision of safe drinking water and sewage, or better food packaging, are likely to be the Winners for the future.